Drive-thru beverages are apparently immune to whatever is ailing the U.S. consumer.
Dutch Bros, the Grants Pass, Oregon-based drive-thru beverage chain, on Wednesday said that its same-store sales rose 6.1% in the second quarter, including 3.7% transaction growth. The company raised guidance for same-store sales, revenues and adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization.
The result sent the company’s stock through the roof. Dutch Bros stock soared 19% before trading began on Thursday.
“We are operating at the intersection of a powerful set of secular trends which are shaping our industry,” CEO Christine Barone told analysts on Wednesday, according to a transcript on the financial services site AlphaSense. “From the rising demand for cold beverages, energy drinks and enhanced customization, we are exceptionally well-positioned to continue the pursuit of our strategic vision.”
Dutch Bros has been one of the fastest-growing chains in the U.S. and is on the forefront of a drive-thru beverage explosion that is reshaping the beverage chain business while putting giant Starbucks on its heels.
The company finished the quarter with 1,043 shops after opening 61 locations this year, including 31 in the second quarter. The company plans to have 2,029 locations open by 2029. “If there’s one takeaway from today’s call, it is this: Dutch Bros is in growth mode,” Barone said.
Those new shops continue to generate strong sales thanks to investments in marketing and other efforts when it opens in new markets and locations. “We’re seeing really nice, strong results across our different markets,” Barone said, noting that the strongest performing shop last week was in Georgia. “It’s just really evident as we open new shops and get to see this amazing demand even in markets very far from our home market in Grants Pass.”
The company was able to generate sales and transactions by bringing back lavender beverages and introducing Dulce de Leche while using ingredients already on-hand. And it introduced new flavors like Sour Berry and Matcha.
Dutch Bros has improved its use of paid advertising, which has helped with brand awareness.
The company has gained traction from its Dutch Rewards loyalty program, which represented 72% of transactions in the period, up five percentage points. Mobile order is also generating traffic and is now 11.5% of transactions, with more than double that in new markets.
Dutch Bros has been focused on improving transactions with better speed and accuracy in its drive-thrus. The company added better dashboards so managers can better oversee throughput. It is also refining its labor model. Barone called both efforts “low-hanging fruit” to generate transaction growth over multiple years.
“We’re still working on some basic blocking and tackling,” Barone said. “I think we have a long runway ahead of us from a throughput perspective.”
And the company continues to test a larger food menu, which is now in 64 company shops. Early results show ticket and transaction growth, particularly in new markets.
Dutch Bros now expects same-store sales to increase about 4.5% for the full year, up from a range of 2% to 4%. It expects revenues of $1.59 billion to $1.6 billion, up from a high range of $1.57 billion. Adjusted EBITDA is expected to range from $285 million to $290 million, up from a high of $275 million.
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